The Effect Of Political-connection On The Railway Debt Financing Capacity And The Risk Control

As an important national infrastructure, the railway is the main artery of national economy. It has an extremely important influence on Chinese economic and social development. Now the Chinese railway debt scale and risks are drawing a lot of attentions. The debt brings a huge pressure on the China Railway Corporation and become an important factor towards the future development of railway. There is not unified viewpoint of the railway debt problem. The external environment constraints have important effect on the economic entities’structure, performance and development, political-connections is one of the connecting link of internal governance and the institutional environment. Research shows that many existing Political-connections has important effects on debt financing. This paper will present political relevance theory and research results into the analysis of debt financing of railway. Firstly the railway’s political-connections is defined and characterized, render the railway political-connections pedigree chart, analysis China’s railway political-connections characteristics and trend; Secondly, the paper study how the political-connections affect the railway debt financing ability and in-depth analysis of its mechanism; Finally, this paper finds that Political-connections has negative effect on the railway debt financing while using the perspective of building a railway debt problem analysis framework based on evolution which can be divided into two situations. The paper discusses the proposed debt risk control measures and suggestions.The main conclusions of this paper are as follows:(1) the Political-connection of China Railway mainly comes from the organization and management of personal political, both of which constitute to the Political-connection system of railway, while railway organization Political-connection occupies the basic and main position; (2) the political-connection mechanism works through the signaling, resource allocation and the implicit guarantee which contributes to the railway debt financing convenience. Its influence on bank loans and railway bonds is different; (3) the railway political-connection’s key role in the debt financing means that the debt financing problems may arise if the political-connection changes. The negative effect of political-connection may worsen the debt problem; (4) The core of the corresponding control measures is the adjustment of relationship between the government and the railway, which should be reasonable. Separate government functions from enterprise management is just the first step to solve and control railway debt problems, standardization of political association is the key measure to further solve the railway debt problems and control the railway debt risk.